The New Net Investment Income Tax – Something To Consider Before Year End

Post by Steven M. Szymanski

As the nation moved towards the fiscal cliff last year, not much attention was given by the media to the implementation of many of the new Obamacare taxes which became effective for taxable years beginning after December 31, 2012. However, some filers may be surprised to find these new taxes once they prepare their 2013 federal income tax returns. One of the new Obamacare taxes is the net investment income tax. The net investment income tax was enacted as part of the Health Care and Education Reconciliation Act of 2010. It laid in the weeds until January 1, 2013 when it became effective.

The net investment income tax is a 3.8 percent tax on the net investment income of individuals, estates and trusts with income above certain statutory threshold amounts. For individuals, the net investment income tax is imposed on the lesser of: (1) an individual taxpayer’s “net investment income” for the tax year, or (2) the excess, if any, of (a) the individual taxpayer’s modified adjusted gross income for tax year over (b) the statutory threshold amount applicable to the taxpayer. For a married taxpayer filing a joint return, the statutory threshold amount is $250,000. For a married taxpayer filing a separate return, the statutory threshold amount is $125,000. For any other instance, the statutory threshold amount is $200,000. Continue reading

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